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[Congressional Bills 104th Congress]
[From the U.S. Government Printing Office]
[H.R. 2060 Introduced in House (IH)]
104th CONGRESS
1st Session
H. R. 2060
To promote freedom, fairness, and economic opportunity for families by
reducing the power and reach of the Federal establishment.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 19, 1995
Mr. Armey introduced the following bill; which was referred to the
Committee on Ways and Means, and in addition to the Committees on
Government Reform and Oversight, the Budget, and Rules, for a period to
be subsequently determined by the Speaker, in each case for
consideration of such provisions as fall within the jurisdiction of the
committee concerned
_______________________________________________________________________
A BILL
To promote freedom, fairness, and economic opportunity for families by
reducing the power and reach of the Federal establishment.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
(a) Short Title.--This Act may be cited as the ``Freedom and
Fairness Restoration Act of 1995''.
(b) Table of Contents.--
Sec. 1. Short title.
TITLE I--TAX REDUCTION AND SIMPLIFICATION; SUPERMAJORITY REQUIRED FOR
TAX CHANGES
Subtitle A--Tax Reduction and Simplification
Sec. 101. Individual income tax.
Sec. 102. Tax on business activities.
Sec. 103. Simplification of rules relating to qualified retirement
plans.
Sec. 104. Repeal of alternative minimum tax.
Sec. 105. Repeal of credits.
Sec. 106. Repeal of estate and gift taxes and obsolete income tax
provisions.
Sec. 107. Effective date.
Subtitle B--Supermajority Required for Tax Changes
Sec. 111. Supermajority required.
TITLE II--SPENDING RESTRAINT AND BUDGET PROCESS REFORM
Subtitle A--Joint Budget Resolution
Sec. 201. Joint budget resolution.
Subtitle B--Zero Based Budgeting and Decennial Sunsetting
Sec. 211. Reauthorization of discretionary programs and unearned
entitlements.
Sec. 212. Point of order.
Sec. 213. Decennial sunsetting.
Subtitle C--Spending Caps on the Growth of Entitlements for Fiscal
Years 1996 Through 2002
Sec. 221. Spending caps on growth of entitlements and mandatories.
Sec. 222. Exempt programs and activities.
Sec. 223. Exceptions, limitations, and special rules.
Sec. 224. Point of order.
Subtitle D--Balanced Budget by Fiscal Year 2002
Sec. 231. Maximum spending amounts.
Sec. 232. Enforcing maximum spending sequestration.
Sec. 233. Total spending point of order.
TITLE I--TAX REDUCTION AND SIMPLIFICATION; SUPERMAJORITY REQUIRED FOR
TAX CHANGES
Subtitle A--Tax Reduction and Simplification
SEC. 101. INDIVIDUAL INCOME TAX.
(a) In General.--Section 1 of the Internal Revenue Code of 1986 is
amended to read as follows:
``SECTION 1. TAX IMPOSED.
``There is hereby imposed on the taxable income of every individual
a tax equal to 20 percent (17 percent in the case of taxable years
beginning after December 31, 1997) of the taxable income of such
individual for such taxable year.''
(b) Taxable Income.--Section 63 of such Code is amended to read as
follows:
``SEC. 63. TAXABLE INCOME.
``(a) In General.--For purposes of this subtitle, the term `taxable
income' means the excess of--
``(1) the sum of--
``(A) wages (as defined in section 3121(a) without
regard to paragraph (1) thereof) which are paid in cash
and which are received during the taxable year for
services performed in the United States,
``(B) retirement distributions which are includible
in gross income for such taxable year, plus
``(C) amounts received under any law of the United
States or of any State which is in the nature of
unemployment compensation, over
``(2) the standard deduction.
``(b) Standard Deduction.--
``(1) In general.--For purposes of this subtitle, the term
`standard deduction' means the sum of--
``(A) the basic standard deduction, plus
``(B) the additional standard deduction.
``(2) Basic standard deduction.--For purposes of paragraph
(1), the basic standard deduction is--
``(A) $21,400 in the case of--
``(i) a joint return, or
``(ii) a surviving spouse (as defined in
section 2(a)),
``(B) $14,000 in the case of a head of household
(as defined in section 2(b)), and
``(C) $10,700 in the case of an individual--
``(i) who is not married and who is not a
surviving spouse or head of household, or
``(ii) who is a married individual filing a
separate return.
``(3) Additional standard deduction.--For purposes of
paragraph (1), the additional standard deduction is $5,000 for
each dependent (as defined in section 152) who is described in
section 151(c)(1) for the taxable year and who is not required
to file a return for such taxable year.
``(c) Retirement Distributions.--For purposes of subsection (a),
the term `retirement distribution' means any distribution from--
``(1) a plan described in section 401(a) which includes a
trust exempt from tax under section 501(a),
``(2) an annuity plan described in section 403(a),
``(3) an annuity contract described in section 403(b),
``(4) an individual retirement account described in section
408(a),
``(5) an individual retirement annuity described in section
408(b),
``(6) an eligible deferred compensation plan (as defined in
section 457);
``(7) a governmental plan (as defined in section 414(d));
or
``(8) a trust described in section 501(c)(18).
Such term includes any plan, contract, account, annuity, or trust
which, at any time, has been determined by the Secretary to be such a
plan, contract, account, annuity, or trust.
``(d) Income of Certain Children.--For purposes of this subtitle--
``(1) an individual's taxable income shall include the
taxable income of each dependent child of such individual who
has not attained age 14 as of the close of such taxable year,
and
``(2) such dependent child shall have no liability for tax
imposed by section 1 with respect to such income and shall not
be required to file a return for such taxable year.
``(e) Inflation Adjustment.--
``(1) In general.--In the case of any taxable year
beginning in a calendar year after 1996, each dollar amount
contained in subsection (b) shall be increased by an amount
determined by the Secretary to be equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment for such
calendar year.
``(2) Cost-of-living adjustment.--For purposes of paragraph
(1), the cost-of-living adjustment for any calendar year is the
percentage (if any) by which--
``(A) the CPI for the preceding calendar year,
exceeds
``(B) the CPI for the calendar year 1995.
``(3) CPI for any calendar year.--For purposes of paragraph
(2), the CPI for any calendar year is the average of the
Consumer Price Index as of the close of the 12-month period
ending on August 31 of such calendar year.
``(4) Consumer price index.--For purposes of paragraph (3),
the term `Consumer Price Index' means the last Consumer Price
Index for all-urban consumers published by the Department of
Labor. For purposes of the preceding sentence, the revision of
the Consumer Price Index which is most consistent with the
Consumer Price Index for calendar year 1986 shall be used.
``(5) Rounding.--If any increase determined under paragraph
(1) is not a multiple of $10, such increase shall be rounded to
the next highest multiple of $10.
``(f) Marital Status.--For purposes of this section, marital status
shall be determined under section 7703.''
SEC. 102. TAX ON BUSINESS ACTIVITIES.
(a) In General.--Section 11 of the Internal Revenue Code of 1986
(relating to tax imposed on corporations) is amended to read as
follows:
``SEC. 11. TAX IMPOSED ON BUSINESS ACTIVITIES.
``(a) Tax Imposed.--There is hereby imposed on every person engaged
in a business activity a tax equal to 20 percent (17 percent in the
case of taxable years beginning after December 31, 1997) of the
business taxable income of such person.
``(b) Liability for Tax.--The tax imposed by this section shall be
paid by the person engaged in the business activity, whether such
person is an individual, partnership, corporation, or otherwise.
``(c) Business Taxable Income.--For purposes of this section--
``(1) In general.--The term `business taxable income' means
gross active income reduced by the deductions specified in
subsection (d).
``(2) Gross active income.--
``(A) In general.--For purposes of paragraph (1),
the term `gross active income' means gross receipts
from--
``(i) the sale or exchange of property or
services in the United States by any person in
connection with a business activity, and
``(ii) the export of property or services
from the United States in connection with a
business activity.
``(B) Exchanges.--For purposes of this section, the
amount treated as gross receipts from the exchange of
property or services is the fair market value of the
property or services received, plus any money received.
``(C) Coordination with special rules for financial
services, etc.--Except as provided in subsection (e)--
``(i) the term `property' does not include
money or any financial instrument, and
``(ii) the term `services' does not include
financial services.
``(3) Exemption from tax for activities of governmental
entities and tax-exempt organizations.--For purposes of this
section, the term `business activity' does not include any
activity of a governmental entity or of any other organization
which is exempt from tax under this chapter.
``(d) Deductions.--
``(1) In general.--The deductions specified in this
subsection are--
``(A) the cost of business inputs for the business
activity,
``(B) wages (as defined in section 3121(a) without
regard to paragraph (1) thereof) which are paid in cash
for services performed in the United States as an
employee, and
``(C) retirement contributions to or under any plan
or arrangement which makes retirement distributions (as
defined in section 63(c)) for the benefit of such
employees to the extent such contributions are allowed
as a deduction under section 404.
``(2) Business inputs.--
``(A) In general.--For purposes of paragraph (1),
the term `cost of business inputs' means--
``(i) the amount paid for property sold or
used in connection with a business activity,
``(ii) the amount paid for services (other
than for the services of employees, including
fringe benefits paid by reason of such
services) in connection with a business
activity, and
``(iii) any excise tax, sales tax, customs
duty, or other separately stated levy imposed
by a Federal, State, or local government on the
purchase of property or services which are for
use in connection with a business activity.
Such term shall not include any tax imposed by chapter
2 or 21.
``(B) Exceptions.--Such term shall not include--
``(i) items described in subparagraphs (B)
and (C) of paragraph (1), and
``(ii) items for personal use not in
connection with any business activity.
``(C) Exchanges.--For purposes of this section, the
amount treated as paid in connection with the exchange
of property or services is the fair market value of the
property or services exchanged, plus any money paid.
``(e) Special Rules for Financial Inter- mediation Service
Activities.--In the case of the business activity of providing
financial intermediation services, the taxable income from such
activity shall be equal to the value of the intermediation services
provided in such activity.
``(f) Exception for Services Performed as Employee.--For purposes
of this section, the term `business activity' does not include the
performance of services by an employee for the employee's employer.
``(g) Carryover of Excess Deductions.--
``(1) In general.--If the aggregate deductions for any
taxable year exceed the gross active income for such taxable
year, the amount of the deductions specified in subsection (d)
for the succeeding taxable year (determined without regard to
this subsection) shall be increased by the sum of--
``(A) such excess, plus
``(B) the product of such excess and the 3-month
Treasury rate for the last month of such taxable year.
``(2) 3-month treasury rate.--For purposes of paragraph
(1), the 3-month Treasury rate is the rate determined by the
Secretary based on the average market yield (during any 1-month
period selected by the Secretary and ending in the calendar
month in which the determination is made) on outstanding
marketable obligations of the United States with remaining
periods to maturity of 3 months or less.''
(b) Tax on Tax-Exempt Entities Providing Noncash Compensation to
Employees.--Section 4977 of such Code is amended to read as follows:
``SEC. 4977. TAX ON NONCASH COMPENSATION PROVIDED TO EMPLOYEES NOT
ENGAGED IN BUSINESS ACTIVITY.
``(a) Imposition of Tax.--There is hereby imposed a tax equal to 20
percent (17 percent in the case of calendar years beginning after
December 31, 1997) of the value of excludable compensation provided
during the calendar year by an employer for the benefit of employees to
whom this section applies.
``(b) Liability for Tax.--The tax imposed by this section shall be
paid by the employer.
``(c) Excludable Compensation.--For purposes of subsection (a), the
term `excludable compensation' means any remuneration for services
performed as an employee other than--
``(1) wages (as defined in section 3121(a) without regard
to paragraph (1) thereof) which are paid in cash,
``(2) remuneration for services performed outside the
United States, and
``(3) retirement contributions to or under any plan or
arrangement which makes retirement distributions (as defined in
section 63(c)).
``(d) Employees To Whom Section Applies.--This section shall apply
to an employee who is employed in any activity by--
``(1) any organization which is exempt from taxation under
this chapter, or
``(2) any agency or instrumentality of the United States,
any State or political subdivision of a State, or the District
of Columbia.''
SEC. 103. SIMPLIFICATION OF RULES RELATING TO QUALIFIED RETIREMENT
PLANS.
(a) In General.--The following provisions of the Internal Revenue
Code of 1986 are hereby repealed:
(1) Nondiscrimination rules.--
(A) Paragraphs (4) and (5) of section 401(a)
(relating to nondiscrimination requirements).
(B) Sections 401(a)(10)(B) and 416 (relating to top
heavy plans).
(C) Section 401(a)(17) (relating to compensation
limit).
(D) Sections 401(a)(26) and 410(b) (relating to
minimum participation and coverage requirements).
(E) Sections 401(k)(3), 401(k)(8), and 4979
(relating to actual deferral percentage).
(F) Section 401(l) (relating to permitted disparity
in plan contributions or benefits).
(G) Section 401(m) (relating to nondiscrimination
test for matching contributions and employee
contributions).
(H) Paragraphs (1)(D) and (12) of section 403(b)
(relating to nondiscrimination requirements).
(I) Paragraph (3) of section 408(k) and paragraph
(6) (other than subparagraph (A)(i)) of such section
(relating to simplified employee pensions).
(2) Contribution limits.--
(A) Sections 401(a)(16), 403(b) (2) and (3), and
415 (relating to limitations on benefits and
contributions under qualified plans).
(B) Sections 401(a)(30) and 402(g) (relating to
limitation on exclusion for elective deferrals).
(C) Paragraphs (3) and (7) of section 404(a)
(relating to percentage of compensation limits).
(D) Section 404(l) (relating to limit on includible
compensation).
(3) Restrictions on distributions.--
(A) Section 72(t) (relating to 10-percent
additional tax on early distributions from qualified
retirement plans).
(B) Sections 401(a)(9), 403(b)(10), and 4974
(relating to minimum distribution rules).
(C) Section 402(d) (relating to tax on lump sum
distributions).
(D) Section 402(e)(4) (relating to net unrealized
appreciation).
(E) Section 4980A (relating to tax on excess
distributions from qualified retirement plans).
(4) Special requirements for plan benefiting self-employed
individuals.--Subsections (a)(10)(A) and (d) of section 401.
(5) Prohibition of tax-exempt organizations and governments
from having qualified cash or deferred arrangements.--Section
401(k)(4)(B).
(b) Employer Reversions of Excess Pension Assets Permitted Subject
Only to Income Inclusion.--
(1) Repeal of tax on employer reversions.--Section 4980 of
such Code is hereby repealed.
(2) Employer reversions permitted without plan
termination.--Section 420 of such Code is amended to read as
follows:
``SEC. 420. TRANSFERS OF EXCESS PENSION ASSETS.
``(a) In General.--If there is a qualified transfer of any excess
pension assets of a defined benefit plan (other than a multiemployer
plan) to an employer--
``(1) a trust which is part of such plan shall not be
treated as failing to meet the requirements of section 401(a)
or any other provision of law solely by reason of such transfer
(or any other action authorized under this section), and
``(2) such transfer shall not be treated as a prohibited
transaction for purposes of section 4975.
The gross income of the employer shall include the amount of any
qualified transfer made during the taxable year.
``(b) Qualified Transfer.--For purposes of this section--
``(1) In general.--The term `qualified transfer' means a
transfer--
``(A) of excess pension assets of a defined benefit
plan to the employer, and
``(B) with respect to which the vesting
requirements of subsection (c) are met in connection
with the plan.
``(2) Only 1 transfer per year.--No more than 1 transfer
with respect to any plan during a taxable year may be treated
as a qualified transfer for purposes of this section.
``(c) Vesting Requirements of Plans Transferring Assets.--The
vesting requirements of this subsection are met if the plan provides
that the accrued pension benefits of any participant or beneficiary
under the plan become nonforfeitable in the same manner which would be
required if the plan had terminated immediately before the qualified
transfer (or in the case of a participant who separated during the 1-
year period ending on the date of the transfer, immediately before such
separation).
``(d) Definition and Special Rule.--For purposes of this section--
``(1) Excess pension assets.--The term `excess pension
assets' means the excess (if any) of--
``(A) the amount determined under section
412(c)(7)(A)(ii), over
``(B) the greater of--
``(i) the amount determined under section
412(c)(7)(A)(i), or
``(ii) 125 percent of current liability (as
defined in section 412(c)(7)(B)).
The determination under this paragraph shall be made as of the
most recent valuation date of the plan preceding the qualified
transfer.
``(2) Coordination with section 412.--In the case of a
qualified transfer--
``(A) any assets transferred in a plan year on or
before the valuation date for such year (and any income
allocable thereto) shall, for purposes of section 412,
be treated as assets in the plan as of the valuation
date for such year, and
``(B) the plan shall be treated as having a net
experience loss under section 412(b)(2)(B)(iv) in an
amount equal to the amount of such transfer and for
which amortization charges begin for the first plan
year after the plan year in which such transfer occurs,
except that such section shall be applied to such
amount by substituting `10 plan years' for `5 plan
years'.''
SEC. 104. REPEAL OF ALTERNATIVE MINIMUM TAX.
Part VI of subchapter A of chapter 1 of the Internal Revenue Code
of 1986 is hereby repealed.
SEC. 105. REPEAL OF CREDITS.
Part IV of subchapter A of chapter 1 of the Internal Revenue Code
of 1986 is hereby repealed.
SEC. 106. REPEAL OF ESTATE AND GIFT TAXES AND OBSOLETE INCOME TAX
PROVISIONS.
(a) Repeal of Estate and Gift Taxes.--
(1) In general.--Subtitle B of the Internal Revenue Code of
1986 is hereby repealed.
(2) Effective date.--The repeal made by paragraph (1) shall
apply to the estates of decedents dying, and gifts and
generation-skipping transfers made, after December 31, 1995.
(b) Repeal of Obsolete Income Tax Provisions.--
(1) In general.--Except as provided in paragraph (2),
chapter 1 of the Internal Revenue Code of 1986 is hereby
repealed.
(2) Exceptions.--Paragraph (1) shall not apply to--
(A) sections 1, 11, and 63 of such Code, as amended
by this Act,
(B) those provisions of chapter 1 of such Code
which are necessary for determining whether or not--
(i) retirement distributions are includible
in the gross income of employees, or
(ii) an organization is exempt from tax
under such chapter, and
(C) subchapter D of such chapter 1 (relating to
deferred compensation).
SEC. 107. EFFECTIVE DATE.
Except as otherwise provided in this subtitle, the amendments made
by this subtitle shall apply to taxable years beginning after December
31, 1995.
Subtitle B--Supermajority Required for Tax Changes
SEC. 111. SUPERMAJORITY REQUIRED.
(a) In General.--It shall not be in order in the House of
Representatives or the Senate to consider any bill, joint resolution,
amendment thereto, or conference report thereon that includes any
provision that--
(1) increases any Federal income tax rate,
(2) creates any additional Federal income tax rate,
(3) reduces the standard deduction, or
(4) provides any exclusion, deduction, credit or other
benefit which results in a reduction in Federal revenues.
(b) Waiver or Suspension.--This section may be waived or suspended
in the House of Representatives or the Senate only by the affirmative
vote of three-fifths of the Members, duly chosen and sworn.
TITLE II--SPENDING RESTRAINT AND BUDGET PROCESS REFORM
Subtitle A--Joint Budget Resolution
SEC. 201. JOINT BUDGET RESOLUTION.
(a) Definitions.--Paragraph (4) of section 3 of the Congressional
Budget Act of 1974 is amended to read as follows:
``(4) the term `joint resolution on the budget' means--
``(A) a joint resolution setting forth the
congressional budget for the United States Government
for a fiscal year as provided in section 301; and
``(B) any other joint resolution revising the
congressional budget for the United States Government
for a fiscal year as described in section 304.''.
(b) Joint Resolution on the Budget.--(1) Section 300 is amended by
striking ``concurrent resolution'' each place it appears and inserting
``joint resolution''.
(2) Section 301(a) of the Congressional Budget Act of 1974 is
amended by striking ``concurrent resolution'' each place it appears
including in the caption and inserting ``joint resolution''.
(3) Section 301(b) is amended by striking ``concurrent resolution''
each place it appears including in the caption and inserting ``joint
resolution''.
(4) Section 301(c) is amended by striking ``concurrent resolution''
each place it appears and inserting ``joint resolution''.
(5) Section 301(e) is amended by striking ``concurrent resolution''
each place it appears and inserting ``joint resolution''.
(6) Section 301(f) is amended by striking ``concurrent resolution''
each place it appears and inserting ``joint resolution''.
(7) Section 301(g) is amended by striking ``concurrent resolution''
each place it appears and inserting ``joint resolution''.
(8) Section 301(h) is amended by striking ``concurrent resolution''
and inserting ``joint resolution''.
(9) Section 301(i) is amended by striking ``concurrent resolution''
each place it appears and inserting ``joint resolution''.
(10) The section heading of section 301 is amended by striking
``annual adoption of concurrent'' and inserting ``annual adoption of
joint''.
(11) The table of contents set forth in section 1(b) of the
Congressional Budget and Impoundment Control Act of 1974 is amended by
striking ``Annual adoption of the concurrent'' in the item relating to
section 301 and inserting ``Annual adoption of the joint''.
(12) Section 302 is amended by striking ``concurrent resolution''
each place it appears and inserting ``joint resolution''.
(13) Section 303, including the heading, is amended by striking
``concurrent resolution'' each place it appears and inserting ``joint
resolution''.
(14) The table of contents set forth in section 1(b) of the
Congressional Budget and Impoundment Control Act of 1974 is amended by
striking ``Concurrent'' in the item relating to section 303 and
inserting ``Joint''.
(15) Section 304 is amended by striking ``concurrent resolution'',
including in the heading, each place it appears and inserting ``joint
resolution''.
(16) The table of contents set forth in section 1(b) of the
Congressional Budget and Impoundment Control Act of 1974 is amended by
striking ``Concurrent'' in the item relating to section 304 and
inserting ``Joint''.
(17) Section 305 is amended by striking ``concurrent resolution'',
including in the heading, each place it appears and inserting ``joint
resolution''.
(18) Section 308 is amended by striking ``concurrent resolution''
each place it appears and inserting ``joint resolution''.
(19) Section 310 is amended by striking ``concurrent resolution''
each place it appears and inserting ``joint resolution''.
(20) Section 311 is amended by striking ``concurrent resolution''
each place it appears and inserting ``joint resolution''.
Subtitle B--Zero Based Budgeting and Decennial Sunsetting
SEC. 211. REAUTHORIZATION OF DISCRETIONARY PROGRAMS AND UNEARNED
ENTITLEMENTS.
(a) Fiscal Year 1996.--Effective October 1, 1995, spending
authority for each unearned entitlement and high-cost discretionary
spending program is terminated unless such spending authority is
reauthorized after the date of enactment of this Act.
(b) Fiscal Year 1997.--Effective October 1, 1996, spending
authority for each discretionary spending program (not including high-
cost discretionary spending programs) is terminated unless such
spending authority is reauthorized after the date of enactment of this
Act.
(c) Definitions.--For purposes of this subtitle--
(1) the term ``unearned entitlement'' means an entitlement
not earned by service or paid for in total or in part by
assessments or contributions such as Social Security, veterans'
benefits, retirement programs, and medicare; and
(2) the term ``high-cost discretionary program'' means the
most expensive one-third of discretionary program within each
budget function account.
SEC. 212. POINT OF ORDER.
(a) In General.--It shall not be in order in the House of
Representatives or the Senate to consider any bill, joint resolution,
amendment, or conference report that includes any provision that
appropriates funds unless such appropriation has been previously
authorized by law.
(b) Waiver or Suspension.--This section may be waived or suspended
in the House of Representatives or the Senate only by the affirmative
vote of three-fifths of the Members, duly chosen and sworn.
SEC. 213. DECENNIAL SUNSETTING.
(a) First Decennial Census Year.--Effective on the first day of the
fiscal year beginning in the first decennial census year after the year
2001 and each 10 years thereafter, the spending authority described in
section 211(a) is terminated unless such spending authority is
reauthorized after the last date the spending authority was required to
be reauthorized under this subtitle.
(b) First Decennial Census Year.--Effective on the first day of the
fiscal year beginning in the year after the first decennial census year
after the year 2001 and each 10 years thereafter, the spending
authority described in section 211(b) is terminated unless such
spending authority is reauthorized after the last date the spending
authority was required to be reauthorized under this subtitle.
Subtitle C--Spending Caps on the Growth of Entitlements for Fiscal
Years 1996 Through 2002
SEC. 221. SPENDING CAPS ON GROWTH OF ENTITLEMENTS AND MANDATORIES.
(a) Cap on Growth of Entitlements.--Effective for each of the
fiscal years 1996 through 2002, the total level of entitlement and
mandatory spending, excluding Social Security, shall not exceed the
total level for the previous fiscal year increased by the consumer
price index, and the growth in eligible population.
(b) Sequestration.--Within 15 days after Congress adjourns to end a
session, and on the same day as a sequestration (if any) under section
253 of the Balanced Budget and Emergency Deficit Control Act of 1985,
there shall be a sequestration to reduce the amount of entitlement and
mandatory spending for the fiscal year beginning in the year the
Congress adjourns by any amount necessary to reduce such spending to
the level set forth in subsection (a) unless that amount is less than
$250,000,000.
(c) Uniform Reductions; Limitations.--The amount required to be
sequestered for the fiscal year under subsection (a) shall be obtained
from nonexempt direct spending accounts by actions taken in the
following order:
(1) First.--The reductions in the programs specified in
section 223(a) (National Wool Act and special milk), section
223(b) (guaranteed student loans), and section 223(c) (foster
care and adoption assistance) shall be made.
(2) Second.--Any additional reductions that may be required
shall be achieved by reducing each remaining nonexempt direct
spending account by the uniform percentage necessary to achieve
those additional reductions, except that--
(A) the low-income programs specified in section
223(d) shall not be reduced by more than 1 percent;
(B) the retirement and veterans benefits specified
in section 223(e) shall not be reduced by more than 2
percent in the manner specified in that section; and
(C) the medicare programs shall not be reduced by
more than 4 percent in the manner specified in section
223(f).
The limitations set forth in subparagraphs (A), (B), and (C)
shall be applied iteratively, and after each iteration the
uniform percentage applicable to all other programs under this
paragraph shall be increased (if necessary) to a level
sufficient to achieve the reductions required by this
paragraph.
SEC. 222. EXEMPT PROGRAMS AND ACTIVITIES.
(a) Descriptions and Lists.--Except as provided in subsection (b),
the following budget accounts or activities shall be exempt from
sequestration:
(1) Net interest.
(2) All payments to trust funds from excise taxes or other
receipts or collections properly creditable to those trust
funds.
(3) All payments from one Federal direct spending budget
account to another Federal budget account; and all
intragovernmental funds including those from which funding is
derived primarily from other Government accounts, except to the
extent that such funds are augmented by direct appropriations
for the fiscal year for which the order is in effect.
(4) Activities resulting from private donations, bequests,
or voluntary contributions to the Government.
(5) Payments from any revolving fund or trust-revolving
fund (or similar activity) that provides deposit insurance or
other Government insurance, Government guarantees, or any other
form of contingent liability, to the extent those payments
result from contractual or other legally binding commitments of
the Government at the time of any sequestration.
(6) Credit liquidating and financing accounts.
(7) The following accounts, which largely fulfill
requirements of the Constitution or otherwise make payments to
which the Government is committed--
Administration of Territories, Northern Mariana
Islands Covenant grants (14-0412-0-1-806);
Bureau of Indian Affairs, miscellaneous payments to
Indians (14-2303-0-1-452);
Bureau of Indian Affairs, miscellaneous trust
funds, tribal trust funds (14-9973-0-7-999);
Claims, defense;
Claims, judgments, and relief act (20-1895-0-1-
806);
Compact of Free Association, economic assistance
pursuant to Public Law 99-658 (14-0415-0-1-806);
Compensation of the President (11-0001-0-1-802);
Customs Service, miscellaneous permanent
appropriations (20-9992-0-2-852);
Eastern Indian land claims settlement fund (14-
2202-0-1-806);
Farm Credit System Financial Assistance
Corporation, interest payments (20-1850-0-1-351);
Internal Revenue collections of Puerto Rico (20-
5737-0-2-852);
Panama Canal Commission, operating expenses and
capital outlay (95-5190-0-2-403);
Payments of Vietnam and USS Pueblo prisoner-of-war
claims (15-0104-0-1-153);
Payments to copyright owners (03-5175-0-2-376);
Payments to the United States territories, fiscal
assistance (14-0418-0-1-801);
Payments to widows and heirs of deceased Members of
Congress (00-0215-0-1-801);
Salaries of Article III judges;
Soldier's and Airmen's Home, payment of claims (84-
8930-0-7-705);
Washington Metropolitan Area Transit Authority,
interest payments (46-0300-0-1-401).
(8) The following noncredit special, revolving, or
trust-revolving funds--
Coinage profit fund (20-5811-0-2-803);
Comptroller of the Currency;
Director of the Office of Thrift Supervision;
Exchange Stabilization Fund (20-4444-0-3-155);
Federal Housing Finance Board;
Foreign Military Sales trust fund (11-82232-0-7-
155).
(9) Thrift Savings Fund.
(10) Appropriations for the District of Columbia to the
extent they are appropriations of locally raised funds.
(11)(A) Any amount paid as regular unemployment
compensation by a State from its account in the Unemployment
Trust Fund (established by section 904(a) of the Social
Security Act).
(B) Any advance made to a State from the Federal
unemployment account (established by section 904(g) of such
Act) under title XII of such Act and any advance appropriated
to the Federal unemployment account pursuant to section 1203 of
such Act.
(C) Any payment made from the Federal Employees
Compensation Account (as established under section 909 of such
Act) for the purpose of carrying out chapter 85 of title 5,
United States Code, and funds appropriated or transferred to or
otherwise deposited in such Account.
(12) The earned income tax credit (payments to individuals
pursuant to section 32 of the Internal Revenue Code of 1986).
(b) Federal Administrative Expenses.--
(1) Notwithstanding any provision of law other than
paragraph (3), administrative expenses incurred by the
departments and agencies, including independent agencies, of
the Federal Government in connection with any program, project,
activity, or account shall be subject to reduction pursuant to
any sequestration order, without regard to any exemption,
exception, limitation, or special rule otherwise applicable
with respect to such program, project, activity, or account,
and regardless of whether the program, project, activity, or
account is self-supporting and does not receive appropriations.
(2) Payments made by the Federal Government to reimburse or
match administrative costs incurred by a State or political
subdivision under or in connection with any program, project,
activity, or account shall not be considered administrative
expenses of the Federal Government for purposes of this
section, and shall be subject to sequestration to the extent
(and only to the extent) that other payments made by the
Federal Government under or in connection with that program,
project, activity, or account are subject to that reduction or
sequestration; except that Federal payments made to a State as
reimbursement of administrative costs incurred by that State
under or in connection with the unemployment compensation
programs specified in subsection (a)(11) shall be subject to
reduction or sequestration under this part notwithstanding the
exemption otherwise granted to such programs under that
subsection.
(3) Notwithstanding any other provision of law, the
administrative expenses of the following programs shall be
exempt from sequestration:
(A) Comptroller of the Currency.
(B) Federal Deposit Insurance Corporation.
(C) Office of Thrift Supervision.
(D) National Credit Union Administration.
(E) National Credit Union Administration, central
liquidity facility.
(F) Federal Retirement Thrift Investment Board.
(G) Resolution Funding Corporation.
(H) Resolution Trust Corporation.
(I) Board of Governors of the Federal Reserve
System.
SEC. 223. EXCEPTIONS, LIMITATIONS, AND SPECIAL RULES.
(a) National Wool Act and the Special Milk Program.--Automatic
spending increases are increases in outlays due to changes in indexes
in the following programs:
(1) National Wool Act; and
(2) Special milk program.
In those programs all amounts other than the automatic spending
increases shall be exempt from reduction under any sequestration order.
(b) The Guaranteed Student Loan Program.--(1) Any reductions which
are required to be achieved from the student loan programs operated
pursuant to part B of title IV of the Higher Education Act of 1965
under any sequestration order shall be achieved only from loans
described in paragraphs (2) and (3) by the application of the measures
described in such paragraphs.
(2) For any loan made during the period beginning on the date that
a sequestration order takes effect with respect to a fiscal year, the
rate used in computing the special allowance payment pursuant to
section 438(b)(2)(A)(iii) of such Act for each of the first four
special allowance payments for such loan shall be adjusted by reducing
such rate by the lesser of--
(A) 0.40 percent, or
(B) the percentage by which the rate specified in such
section exceeds 3 percent.
(3) For any loan made during the period beginning on the date that
a sequestration order takes effect with respect to a fiscal year, the
origination fee which is authorized to be collected pursuant to section
438(c)(2) of such Act shall be increased by 0.50 percent.
(c) Foster Care and Adoption Assistance Programs.--Any
sequestration order shall make the reduction otherwise required under
the foster care and adoption assistance programs (established by part E
of title IV of the Social Security Act) only with respect to payments
and expenditures made by States in which increases in foster care
maintenance payment rates or adoption assistance payment rates (or
both) are to take effect during the fiscal year involved, and only to
the extent that the required reduction can be accomplished by applying
a uniform percentage reduction to the Federal matching payments that
each such State would otherwise receive under section 474 of that Act
(for such fiscal year) for that portion of the State's payments
attributable to the increases taking effect during that year. No
State's matching payments from
the Federal Government for foster care maintenance payments or for
adoption assistance maintenance payments may be reduced by a percentage
exceeding the applicable domestic sequestration percentage. No State
may, after the date of the enactment of this Act, make any change in
the timetable for making payments under a State plan approved under
part E of title IV of the Social Security Act which has the effect of
changing the fiscal year in which expenditures under such part are
made.
(d) Low-Income Entitlements.--(1) Benefit payments or payments to
States or other entities for the programs listed in paragraph (2) shall
not be reduced by more than 1 percent under any sequestration order.
When reduced under an end-of-session sequestration order, those benefit
reductions shall occur starting with the payment made at the start of
January. When reduced under a within-session sequestration order, those
benefit reductions shall occur starting with the next periodic payment.
(2) The programs referred to in paragraph (1) are the following:
Aid to families with dependent children (75-0412-0-1-609);
Child nutrition (12-3539-0-1-605);
Food stamp programs (12-3505-0-1-605) and (12-3550-0-1-
605);
Grants to States for medicaid (75-0512-0-1-551); and
Supplemental security income program (75-0406-0-1-609).
(e) Federal Retirement and Veterans' Programs.--
(1) For each of the programs listed in paragraph (2) and
except as provided in paragraph (3), monthly (or other
periodic) benefit payments shall be reduced by the uniform
percentage applicable to direct spending sequestrations for
such programs under section 221(c)(2), which shall in no case
exceed 2 percent under any sequestration order. When reduced
under an end-of-session sequestration order, those benefit
reductions shall occur starting with the payment made at the
start of January or 7 weeks after the order is issued,
whichever is later. When reduced under a within-session
sequestration order, those benefit reductions shall occur
starting with the next periodic payment.
(2) The programs subject to paragraph (1) are:
Benefits payable under sections 3(a), 3(f)(3),
4(a), or 4(f) of the Railroad Retirement Act of 1974;
Benefits under chapter 21 of title 38, United
States Code, relating to specially adapted housing and
mortgage-protection life insurance for certain veterans
with service-connected disabilities (36-0137-0-1-702);
Benefits under section 907 of title 38, United
States Code, relating to burial benefits for veterans
who die as a result of service-connected disability
(36-0155-0-1-701);
Benefits under chapter 39 of title 38, United
States Code, relating to automobiles and adaptive
equipment for certain disabled veterans and members of
the Armed Forces (36-0137-0-1-702);
Black lung benefits (20-8144-0-7-601);
Central Intelligence Agency retirement and
disability system fund (56-3400-0-1-054);
Civil service retirement and disability fund (24-
8135-0-7-602);
Comptrollers general retirement system (05-0107-0-
1-801);
Foreign service retirement and disability fund (19-
8186-0-7-602);
Judicial survivors' annuities fund (10-8110-0-7-
602);
Longshoremen's and harborworkers' compensation
benefits (16-9971-0-7-601);
Military retirement fund (97-8097-0-7-602);
National Oceanic and Atmospheric Administration
retirement (13-1450-0-1-306);
Pensions for former Presidents (47-0105-0-1-802);
Railroad retirement tier II (60-8011-0-7-601);
Railroad supplemental annuity pension fund (60-
8012-0-7-602);
Retired pay, Coast Guard (69-0241-0-1-403);
Retirement pay and medical benefits for
commissioned officers, Public Health Service (75-0379-
0-1-551);
Special benefits, Federal Employees' Compensation
Act (16-1521-0-1-600);
Special benefits for disabled coal miners (75-0409-
0-1-601);
Tax Court judges survivors annuity fund (23-8115-0-
7-602);
Veterans' compensation (36-0153-0-1-701); and
Veterans' pensions (36-0154-0-1-701).
(f) Medicare Program.--
(1) Calculation of reduction in individual payment
amounts.--To achieve the total percentage reduction in those
programs required by section 221, the percentage reduction that
shall apply to payments under the health insurance programs
under title XVIII of the Social Security Act for services
furnished after any sequestration order is issued shall be such
that the reduction made in payments under that order shall
achieve the required total percentage reduction in those
payments for that fiscal year as determined on a 12-month
basis.
(2) Timing of application of reductions.--
(A) In general.--Except as provided in subparagraph
(B), if a reduction is made under paragraph (1) in
payment amounts pursuant to a sequestration order, the
reduction shall be applied to payment for services
furnished after the effective date of the order. For
purposes of the previous sentence, in the case of
inpatient services furnished for an individual, the
services shall be considered to be furnished on the
date of the individual's discharge from the inpatient
facility.
(B) Payment on the basis of cost reporting
periods.--In the case in which payment for services of
a provider of services is made under title XVIII of the
Social Security Act on a basis relating to the
reasonable cost incurred for the services during a cost
reporting period of the provider, if a reduction is
made under paragraph (1) in payment amounts pursuant to
a sequestration order, the reduction shall be applied
to payment for costs for such services incurred at any
time during each cost reporting period of the provider
any part of which occurs after the effective date of
the order, but only (for each such cost reporting
period) in the same proportion as the fraction of the
cost reporting period that occurs after the effective
date of the order.
(3) No increase in beneficiary charges in assignment-
related cases.--If a reduction in payment amounts is made under
paragraph (1) for services for which payment under part B of
title XVIII of the Social Security Act is made on the basis of
an assignment described in section 1842(b)(3)(B)(ii), in
accordance with section 1842(b)(6)(B), or under the procedure
described in section 1870(f)(1) of such Act, the person
furnishing the services shall be considered to have accepted
payment of the reasonable charge for the services, less any
reduction in payment amount made pursuant to a sequestration
order, as payment in full.
(4) No effect on computation of aapcc.--In computing the
adjusted average per capita cost for purposes of section
1876(a)(4) of the Social Security Act, the Secretary of Health
and Human Services shall not take into account any reductions
in payment amounts which have been or may be effected under
this subtitle.
(g) Federal Pay.--
(1) In general.--Except as provided in section 222(b)(3),
new budget authority to pay Federal personnel shall be reduced
by the uniform percentage calculated under section 221(c), but
no sequestration order may reduce or have the effect of
reducing the rate of pay to which any individual is entitled
under any statutory pay system (as increased by any amount
payable under section 5304 of title 5, United States Code, or
section 302 of the Federal Employees Pay Comparability Act of
1990) or the rate of any element of military pay to which any
individual is entitled under title 37, United States Code, or
any increase in rates of pay which is scheduled to take effect
under section 5303 of title 5, United States Code, section 1009
of title 37, United States Code, or any other provision of law.
(2) Definitions.--For purposes of this subsection:
(A) The term ``statutory pay system'' shall have
the meaning given that term in section 5302(1) of title
5, United States Code.
(B) The term ``elements of military pay'' means--
(i) the elements of compensation of members
of the uniformed services specified in section
1009 of title 37, United States Code,
(ii) allowances provided members of the
uniformed services under sections 403a and 405
of such title, and
(iii) cadet pay and midshipman pay under
section 203(c) of such title.
(C) The term ``uniformed services'' shall have the
meaning given that term in section 101(3) of title 37,
United States Code.
(h) Child Support Enforcement Program.--Any sequestration order
shall accomplish the full amount of any required reduction in
expenditures under sections 455 and 458 of the Social Security Act by
reducing the Federal matching rate for State administrative costs under
such program, as specified (for the fiscal year involved) in section
455(a) of such Act, to the extent necessary to reduce such expenditures
by that amount.
(i) Extended Unemployment Compensation.--(1) A State may reduce
each weekly benefit payment made under the Federal-State Extended
Unemployment Compensation Act of 1970 for any week of unemployment
occurring during any period with respect to which payments are reduced
under an order issued under this subtitle by a percentage not to exceed
the percentage by which the Federal payment to the State under section
204 of such Act is to be reduced for such week as a result of such
order.
(2) A reduction by a State in accordance with subparagraph (A)
shall not be considered as a failure to fulfill the requirements of
section 3304(a)(11) of the Internal Revenue Code of 1986.
(j) Commodity Credit Corporation.--
(1) Powers and authorities of the commodity credit
corporation.--This subtitle shall not restrict the Commodity
Credit Corporation in the discharge of its authority and
responsibility as a corporation to buy and sell commodities in
world trade, to use the proceeds as a revolving fund to meet
other obligations and otherwise operate as a corporation, the
purpose for which it was created.
(2) Reduction in payments made under contracts.--(A)
Payments and loan eligibility under any contract entered into
with a person by the Commodity Credit Corporation prior to the
time any sequestration order has been issued shall not be
reduced by an order subsequently issued. Subject to
subparagraph (B), after any sequestration order is issued for a
fiscal year, any cash payments made by the Commodity Credit
Corporation--
(i) under the terms of any one-year contract
entered into in or after such fiscal year and after the
issuance of the order; and
(ii) out of an entitlement account,
to any person (including any producer, lender, or guarantee
entity) shall be subject to reduction under the order.
(B) Each contract entered into with producers or producer
cooperatives with respect to a particular crop of a commodity
and subject to reduction under subparagraph (A) shall be
reduced in accordance with the same terms and conditions. If
some, but not all, contracts applicable to a crop of a
commodity have been entered into prior to the issuance of any
sequestration order, the order shall provide that the necessary
reduction in payments under contracts applicable to the
commodity be uniformly applied to all contracts for succeeding
crops of the commodity, under the authority provided in
paragraph (3).
(3) Delayed reduction in outlays permissible.--
Notwithstanding any other provision of this subtitle, if any
sequestration order is issued with respect to a fiscal year,
any reduction under the order applicable to contracts described
in paragraph (2) may provide for reductions in outlays for the
account involved to occur in the fiscal years following the
fiscal year to which the order applies.
(4) Uniform percentage rate of reduction and other
limitations.--All reductions described in paragraph (2) that
are required to be made in connection with any sequestration
order with respect to a fiscal year--
(A) shall be made so as to ensure that outlays for
each program, project, activity, or account involved
are reduced by a percentage rate that is uniform for
all such programs, projects, activities, and accounts,
and may not be made so as to achieve a percentage rate
of reduction in any such item exceeding the rate
specified in the order; and
(B) with respect to commodity price support and
income protection programs, shall be made in such
manner and under such procedures as will attempt to
ensure that--
(i) uncertainty as to the scope of benefits
under any such program is minimized;
(ii) any instability in market prices for
agricultural commodities resulting from the
reduction is minimized; and
(iii) normal production and marketing
relationships among agricultural commodities
(including both contract and non-contract
commodities) are not distorted.
In meeting the criterion set out in clause (iii) of
subparagraph (B) of the preceding sentence, the
President shall take into consideration that reductions
under an order may apply to programs for two or more
agricultural commodities that use the same type of
production or marketing resources or that are
alternative commodities among which a producer could
choose in making annual production decisions.
(5) Certain authority not to be limited.--Nothing in this
subtitle shall limit or reduce in any way any appropriation
that provides the Commodity Credit Corporation with funds to
cover the Corporation's net realized losses.
(k) The JOBS Portion of AFDC.--
(1) Full amount of sequestration required.--Any
sequestration order shall accomplish the full amount of any
required reduction of the job opportunities and basic skills
training program under section 402(a)(19), and part F of title
VI, of the Social Security Act, in the manner specified in this
subsection. Such an order may not reduce any Federal matching
rate pursuant to section 403(l) of the Social Security Act.
(2) New allotment formula.--
(A) General rule.--Notwithstanding section 403(k)
of the Social Security Act, each State's percentage
share of the amount available after sequestration for
direct spending pursuant to section 403(l) of such Act
shall be equal to that percentage of the total amount
paid to the States pursuant to such section 403(l) for
the prior fiscal year that is represented by the amount paid to such
State pursuant to such section 403(l) for the prior fiscal year, except
that a State may not be allotted an amount under this subparagraph that
exceeds the amount that would have been allotted to such State pursuant
to such section 403(k) had the sequestration not been in effect.
(B) Reallotment of amounts remaining unallotted
after application of general rule.--Any amount made
available after sequestration for direct spending
pursuant to section 403(l) of the Social Security Act
that remains unallotted as a result of subparagraph (A)
of this paragraph shall be allotted among the States in
proportion to the absolute difference between the
amount allotted, respectively, to each State as a
result of such subparagraph and the amount that would
have been allotted to such State pursuant to section
403(k) of such Act had the sequestration not been in
effect, except that a State may not be allotted an
amount under this subparagraph that results in a total
allotment to the State under this paragraph of more
than the amount that would have been allotted to such
State pursuant to such section 403(k) had the
sequestration not been in effect.
(l) Postal Service Fund.--Notwithstanding any other provision of
law, any sequestration of the Postal Service Fund shall be accomplished
by a payment from that Fund to the General Fund of the Treasury, and
the Postmaster General of the United States shall make the full amount
of that payment during the fiscal year to which the presidential
sequestration order applies.
(m) Effects of Sequestration.--The effects of sequestration shall
be as follows:
(1) Budgetary resources sequestered from any account other
than an entitlement trust, special, or revolving fund account
shall revert to the Treasury and be permanently canceled.
(2) Except as otherwise provided, the same percentage
sequestration shall apply to all programs, projects, and
activities within a budget account (with programs, projects,
and activities as delineated in the appropriation Act or
accompanying report for the relevant fiscal year covering that
account, or for accounts not included in appropriation Acts, as
delineated in the most recently submitted President's budget).
(3) Administrative regulations or similar actions
implementing a sequestration shall be made within 120 days of
the sequestration order. To the extent that formula allocations
differ at different levels of budgetary resources within an
account, program, project, or activity, the sequestration shall
be interpreted as producing a lower total appropriation, with
that lower appropriation being obligated as though it had been
the pre-sequestration appropriation and no sequestration had
occurred.
(4) Except as otherwise provided, obligations in
sequestered direct spending accounts shall be reduced in the
fiscal year in which a sequestration occurs and in all
succeeding fiscal years.
(5) If an automatic spending increase is sequestered, the
increase (in the applicable index) that was disregarded as a
result of that sequestration shall not be taken into account in
any subsequent fiscal year.
(6) Except as otherwise provided, sequestration in accounts
for which obligations are indefinite shall be taken in a manner
to ensure that obligations in the fiscal year of a
sequestration and succeeding fiscal years are reduced, from the
level that would actually have occurred, by the applicable
sequestration percentage.
SEC. 224. POINT OF ORDER.
(a) In General.--It shall not be in order in the House of
Representatives or the Senate to consider any bill, joint resolution,
amendment thereto, or conference report thereon that includes any
provision that has the effect of modifying the application of this
subtitle to any entitlement program subject to sequestration or exempt
from sequestration under this subtitle.
(b) Waiver or Suspension.--This section may be waived or suspended
in the House of Representatives or the Senate only by the affirmative
vote of three-fifths of the Members, duly chosen and sworn.
Subtitle D--Balanced Budget by Fiscal Year 2002
SEC. 231. MAXIMUM SPENDING AMOUNTS.
Section 601(a)(1) of the Congressional Budget Act of 1974 is
amended to read as follows:
``(1) Maximum spending amount.--The term `maximum spending
amount' means--
``(A) with respect to fiscal year 1996,
$1,561,000,000,000 in outlays;
``(B) with respect to fiscal year 1997,
$1,592,000,000,000 in outlays;
``(C) with respect to fiscal year 1998,
$1,624,000,000,000 in outlays;
``(D) with respect to fiscal year 1999,
$1,657,000,000,000 in outlays;
``(E) with respect to fiscal year 2000,
$1,706,000,000,000 in outlays;
``(F) with respect to fiscal year 2001,
$1,757,000,000,000 in outlays; and
``(G) with respect to fiscal year 2002,
$1,810,000,000,000 in outlays.''.
SEC. 232. ENFORCING MAXIMUM SPENDING SEQUESTRATION.
(a) Sequestration.--Section 253(a) of the Balanced Budget and
Emergency Deficit Control Act of 1985 is amended to read as follows:
``(a) Sequestration.--Within 15 days after Congress adjourns to end
a session (other than the One Hundred Third Congress), and on the same
day as sequestration (if any) under sections 251 and 252, but after any
sequestration required by those sections, there shall be a
sequestration (if necessary) to reduce total Federal spending to the
maximum permissible level as set forth in section 601(a)(1) of the
Congressional Budget Act of 1974.''.
(b) Conforming Amendment to Heading.--The section heading of
section 253 of the Balanced Budget and Emergency Deficit Control Act of
1985 is amended to read as follows:
``SEC. 253. ENFORCING MAXIMUM SPENDING LIMITS.''.
(c) Additional Conforming Amendments.--Section 253 of the Balanced
Budget and Emergency Deficit Control Act of 1985 is amended--
(1) by repealing subsections (b), (g), and (h), and by
redesignating subsections (c), (d), (e), and (f), as
subsections (b), (c), (d), and (e), respectively;
(2) in subsection (b) (as redesignated), by amending the
first sentence to read as follows: ``To reduce total Federal
spending to the maximum permissible level for a budget year, 20
percent of the required outlay reductions shall be obtained
from non-exempt defense accounts (accounts designated as
function 050 in the President's fiscal year 1996 budget
submission) and 80 percent from non-exempt, non-defense
accounts (all other non-exempt accounts).'';
(3) in subsection (c) (as redesignated), by striking
``subsection (c)'' and inserting ``subsection (b)''; and
(4) in subsection (e) (as redesignated), by striking ``(b),
(c), (d), and (e)'' and inserting ``(b), (c), and (d)'' and by
striking ``(d) or (e)'' and inserting ``(c) or ``(d)''.
(d) Look-Back Sequester.--Section 253 of the Balanced Budget and
Emergency Deficit Control Act of 1985 is amended by adding at the end
the following new subsection:
``(f) Look-Back Sequester.--
``(1) In general.--On July 1 of each fiscal year, the
Director of OMB shall determine if laws effective during the
current fiscal year will cause spending to exceed the maximum
spending amount for such fiscal year. If the limit is exceeded,
there shall be a preliminary sequester on July 1 to eliminate
the excess.
``(2) Permanent sequester.--Budget authority sequestered on
July 1 pursuant to paragraph (1) shall be permanently canceled
on July 15.
``(3) No margin.--The margin for determining a sequester
under this subsection shall be zero.
``(4) Sequestration procedures.--The provision of
subsections (b), (c), and (d) of this section shall apply to a
sequester under this subsection.''.
(e) Reports.--Section 254 of the Balanced Budget and Emergency
Deficit Control Act of 1985 is amended--
(1) by striking subsection (c);
(2) in subsection (d)(1), by striking ``deficit
sequestration'' and inserting ``total spending sequestration'';
(3) in subsection (d) by repealing paragraph (4) and
inserting the following new paragraph:
``(4) Total spending sequestration reports.--The preview
reports shall set forth for the budget year estimates for each
of the following:
``(A) The amount of reductions required from
defense accounts and the reductions required from non-
defense accounts.
``(B) The sequestration percentage necessary to
achieve the required reduction in defense accounts
under section 253(c).
``(C) The reductions required under sections
253(d)(1) and 253(d)(2).
``(D) The sequestration percentage necessary to
achieve the required reduction in non-defense accounts
under section 253(d)(3).''; and
(4) in subsection (g)(3), by striking ``Deficit'' and
inserting ``Total Spending'' in the side heading and in the
first sentence by striking ``deficit'' and inserting ``total
spending''.
(f) Conforming Amendment to Table of Contents.--The item relating
to section 253 is amended by striking ``Enforcing deficit targets'' and
inserting ``Enforcing maximum spending limits''.
SEC. 233. TOTAL SPENDING POINT OF ORDER.
(a) Total Spending Point of Order.--Section 605(b) of the
Congressional Budget Act of 1974 is amended to read as follows:
``(b) Total Spending Point of Order.--
``(1) In general.--It shall not be in order in the House of
Representatives or the Senate to consider any bill, joint
resolution, amendment thereto, or conference report thereon,
that includes any provision that would result in total spending
for a fiscal year that exceeds the maximum permissible total
spending amount for such fiscal year as set forth in section
601(a)(1).
``(2) Waiver or suspension.--This subsection may be waived
or suspended in the House of Representatives or the Senate only
by the affirmative vote of three-fifths of its Members, duly
chosen and sworn.''.
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